Abstract

Microfinance is largely seen as a tool for promoting economic growth, and poverty reduction. It involves the supply of financial services on a micro scale to low income earners usually operating in the informal sector and located in rural and semi-urban communities. In Nigeria, microfinance banking commenced in 2005, as an offshoot of the defunct community banks, with the aim of catering for the underserved public, which the commercial banks could no longer reach due to size of operations. However, several market surveys conducted suggest that the performance of microfinance banks (Mfb) in Nigeria has not been impressive. This underperformance is in the area of financial inclusion for the bottom poor of the pyramid, and expansion of micro businesses. Approximately 40% of Nigerians live in poverty. The effective operation of Nigeria’s microfinance scheme is therefore vital in reversing this trend; especially as improving access to finance is a key objective of the government’s economic growth plan.

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